Funding for renewable energy and energy efficiency

1. Funding for renewable energy and energy efficiency Peep Mardiste pepe@ut.ee

2. Opportunity for climate: lowering energy intensity of economies Energy consumption in relation to GDP (tons of oil equivalents per 1 million Euro) • Denmark 123 • Germany 165 • Sweden 224 • Finland 272 • Poland 650 • Latvia 759 • Estonia 1156 • Lithuania 1273

4. Which investment priorities?

5. Potential priority for funding: energy saving in households? • in Russia the technical energy saving potential is 40...45% of total energy consumption • EU has in average more than 20% saving potential • in EU buildings account for 40% of total energy consumption • in EU buildings have 27% energy saving potential by 2020 (which would decrease EU energy consumption by 11%) • in reducing the energy use in buildings, insulation is key (accounts for 78% of reduction potential) • insulation on pitched roof need ~30 EUR/m² investment, annual energy saving ~7.5 EUR/m² payback time is 4 years

6. Example of needs in housing sector: Estonia • 1.4 million inhabitants • 1.1 million live in housing co-operatives • current energy use ~250 kWh / m² / year • simple repair can achieve ~50 kWh / m² / year: - insulation of walls - using of windows which keep warm - using proper ventilation - enabling to adjust temperature in radiators - replace incandescent lightbulbs with energy saving lamps - using solar panels for heating of water in Summer • cost of repair ~200 EUR / m² • In 10 years total investment in Estonia: 6 billion EUR (= energy bills of households in 20 years) • Financial need: state guarantees + international fund (potential EU Climate Fund 2014-2020)

7. Energy saving potential in housing

8. EU framework for energy saving in households • EU Directive 2002/91/EC on energy performance of buildings (EPBD) • Green Paper on Energy Efficiency • Action Plan for Energy Efficiency 2007-2013 More ambition needed in EPBD: • abolish current 1000 m² threshold for major renovations • establish minimum performance requirements for buildings • Commission shall push all Member States to have very low-energy (or zero-net energy) standards by 2015 • Member States shall ensure that financing, subsidies and incentives are in place to allow rapid implementation of proven available energy efficiency improvements (especially in existing buildings)

9. Financial sources available in the Baltic Sea region

10. Financial sources for renewable energy and energy efficiency, 1 Funds and programmes of the European Union: • Baltic Sea Region Programme • Competitiveness and Innovation Programme • Interreg IVB and Interreg IVC • JESSICA and JEREMIE • Seventh Framework Programme • Structural Funds

11. Financial sources for renewable energy and energy efficiency, 2 Other financial instruments: • EU-Russia cooperation funds • European Bank for Reconstruction and Development (EBRD) • European Investment Bank (EIB) • Council of Europe Development Bank • Global Energy Efficiency and Renewable Energy Fund (GEEREF) • Nordic Investment Bank (NIB) • Nordic Environmental Finance Corporation (NEFCO)

12. Availability of funds in countries

13. EU: Baltic Sea Region Programme • Baltic Sea Region Programme 2007-2013 • built on earlier experience of 1997-1999 Interreg IIC and 2000-2006 Interreg IIIB • under European Territorial Cooperation Objective and European Neighbourhood and Parthership Instrument • total budget of 237 million EUR • mostly targeted at territorial cohesion and cross-border cooperation • transnationally relevant innovations in SMEs such as promotion and transfer of knowledge in alternative and renewable energy management patterns, environmentally sound and eco-efficient technology • target of financing: - 5 renewable energy projects (worth of total some 8 mEUR) - 3 energy efficiency projects (worth of some 4 mEUR)

14. EU-Russia cooperation funds • main framework for EU funding for projects in Russia consists of Annual Action Programmes under the European Neighbourhood and Partnership Instrument (ENPI) - EU-Russia Energy Technology Centre: support in preparation of bankable projects in the energy sector and providing technical assistance for project proposals, feasibility studies and other papers on energy efficiency • Northern Dimension Environmental Program (NDEP) - started in 2001, 2.4 billion EUR pipeline of projects - international framework for financing priority environmental projects in north-west Russia - combines resources from EC, EIB, EBRD, NIB, World Bank and Russian Federation - energy efficiency is eligible (district heating Kaliningrad, Murmanks)

15. EU: Structural Funds • 36% of the EU budget • 2007-2013 strategic guidelines lists energy efficiency and renewable energy as one of the 12 priorities • de-centralised through some 450 national and regional Operational Programmes (OPs) • estimated 4.8 billion EUR for renewable energies and 4.2 billion EUR for energy efficiency • just some 2.6% of total Structural Funds budget (up from 1.6% in 2000-2006) • mixed ambition in Member States: over 5% in Lithuania, some 1.7% in Poland

16. EU: Structural Funds Percentage of total 2007-2013 Structural Funds assigned for sustainable energy in Central and Eastern Europe (draft!)

17. European Bank for Reconstruction and Development (EBRD) • operates in Russia, Estonia, Latvia, Lithuania, Poland • the only international financial institution (IFI) with a specialized energy efficiency team • target to lend or invest a total 1 billion EUR in energy efficiency and renewable energy projects in 2006-2010 • loans to projects of a significant scale which save energy • supports energy service companies’ (ESCO) projects which target social facilities, such as schools or hospitals • loans for rehabilitation of district heating infrastructure

18. Draft recommendations: EU Structural Funds • While carrying out in 2010 a mid-term review of use of EU Structural Funds for 2007-2013 the Commission and Member States shall indicate the share of projects implemented in sectors of energy efficiency and renewable energy and if needed, increase relevant allocations. • While drafting and negotiating the Regulation for use of EU Structural Funds for 2014-2020 earmarking of certain percentage of funds in all eligible regions for energy efficiency and renewable energy projects shall be considered.

19. Draft recommendations: EU-Russia cooperation funds • In context of Baltic Sea region it’s important that EU continues and increases support to energy efficiency initiatives in Russia within ENPI. Individual EU member states from Baltic Sea region could also consider earmarking additional funds for concrete partnerships on energy efficiency such as EU-Russia Energy Technology Centre.

20. Draft recommendations: EBRD • EBRD shall revise its energy policy to ensure emphasis on energy efficiency and set up gradually increasing targets for investments into energy efficiency, reaching for example earmarking of 50% of all lending in the power sector to increasing energy efficiency. • EBRD shall revise its energy policy in order to set up targets for the financing of renewable energy projects, for example allocating 50% of all lending in the power sector in current or future EU Member States to renewable energy. • Prior to the approval of any project, EBRD shall review related energy efficiency issues and ensure that an energy audit is undertaken.

21. Draft recommendations: NIB • While Bank lends typically up to 50% of the project costs it shall consider adopting a policy of increasing its share of financing in case of renewable energy and energy efficiency projects to 80% or 90%. • Prior to the approval of any project, NIB shall review related of energy efficiency issues and ensure that an energy audit is undertaken.